Company Overview: (Assignment 1)
General Background
What is the background of Hotels.com corporation since it started? Hotels.com is a website for reserving hotel rooms through their online page or by phone. What hotels.com does is to offer discounted hotel rooms and book them to their travelers, In addition; they serve their travelers worldwide that make them professionals and fame everywhere. According to “Bloomberg Business” that hotels.com was named as Hotels Reservations Network and have been changed to Hotels.com in 2002. Nevertheless, they have their own app in order to deliver their services to their customers easily and conveniently. Hotels.com app has many different deals than what their competitors have in methods of pricing and high quality services. It provides more than 34 languages and more than 300,000 hotels are listed on the website in more than 19,000 locations. Hotels.com Limited Partnership, in Dallas, Texas, runs Hotels.com. It goes right under Expedia cooperation, but it is one of the world’s largest cooperative of hotel rooms reserving website that can offer its traveler too many choices of more than thousands of hotels around the world.
Historic Events:
Timeline:
- 1991“Hotel Reservations Network (the predecessor to hotels.com®) is founded by David Litman and Robert Deiner. Company focuses on offering discount prices for hotels in major U.S. cities via a toll-free phone service.”[1]
- 2001 “HRM was acquired by USA Networks Inc (USAI) which also acquired a controlling interest in Expedia, the online travel booking company.”[2]
- 2002 “After buying the domain name for approximately US$11m, HRN changed its name in 2002 to Hotels.com and launched the offline brand 1-800-2-Hotels as well as allowing hotel bookings on line. There followed a period of rapid international expansion with 29 sites added over the next two years.”[3]
- 2003 “USAI was renamed InterActiveCorp (IAC).”[4]
- 2004 “Hotels.com has published a twice-yearly review of international hotel room price trends called the Hotels.com Hotel Price Index.”[5]
- 2005 “IAC separated its travel business under the name Expedia Inc. Hotels.com then became an operating company of Expedia Inc., now the world’s largest online travel company.”[6]
“International growth since 2002 has included web sites for North, Central and South America, Europe, Australia, Japan, China and the Pacific Rim, the Middle East and South Africa.”[7]
“The number of properties offered increases to 20,000.”[8]
- 2006 “Hotels.com adds customer reviews to irs site.”[9]
- 2007 “U.S. disability rights infringement.[10] Hotels.com agreed to provide suitable accessibility information about hotels sold on its website.”[11]
- 2008 " ‘Hotels.com Rewards’ (formerly "Welcome Rewards") launched in the US, Canada and much of Latin America.”[12]
- 2009-2011 “Smart is created (Voiced by Ed Helms).”[13] “Captain Obvious is the advertising character since 2014.”
- 2010 " ‘Hotels.com Rewards’ extended to the UK and Australia.”[14]
- 2011 " ‘Hotels.com Rewards’ extended to more than 40 additional countries.”[15]
“Web sites for Indonesia and Vietnam launched in 2011.Customers in all countries can book online or by phoning one of the multilingual call centres. Calls are both toll-free and paid, depending on the country of booking.”[16]
“Hotels.com launched an iPad application and updated its mobile phone product on iPhone and Android.”[17]
Business Model:
Hotels.com promotes a virtual merchant business mode. And as we stated above that Hotels.com is a brand that comes originally from Expedia, but not like Expedia; Hotels.com brand is specialized and focuses only on a hotel only products. Hotels.com business model is focusing only on marketing and promoting Hotel rooms. They have more than 85 localized sites around the world and a major market app on all major platforms.
For Expedia, Hotels.com is their first step and their first entry point in any new market or any new region. This allows Expedia to evaluate the market needs first and what opportunity this market offers prior adding any other brands, services, or offers.
Hotels.com with the assistance of Expedia provides 24 hours a day, seven days a week call center. This call center’s purpose is to provide traveler sales and support by either telephone or e-mail.
Like many of its competitor; Hotels.com promote a loyalty program.
Regardless of the hotel’s type or chain; this program allows many of it customers to have discounts and offers on most of the hotels. And they get big offers and price discounts for every 10 nights spent at hotels that is booked with Hotels.com, customers can claim these offers and discounts on the next subsequent booking, or they can just save them for a later time. Hotels.com offers these reductions on an equivalent to the average price paid by the customer for that hotel reservation. Of course these discounts does not apply on the taxes and some other fees payments.
In their growth and expanding strategy, Hotels.com leverage significant investments in technology, operations, brand building, supplier relationships and other initiatives enhances the value of technology innovations they believe they introduce on behalf of the travelers and suppliers. Their huge growth has gave them the ability to negotiate competitive rates with the supply partners to provide a lot of choices and travel deals to their customers.
The loyalty program is called “Hotels.com Rewards”, it is now has spread to basically all the countries that Hotels.com services are provided in. But the program launched first in the US and Canada, then it’s been extending to the most of the Latin American in 2008, then it went viral in 2011 to Europe and everyplace else.
(Assignment 2)
In assignment 1 we gave a brief background on Hotels.com, and we explained their business model. In this assignment we will focus on the strategic analysis of the company. Hotels.com is an online travel company that is owned by Expedia Inc. Hotels.com along with Expedia and other similar businesses and agencies in the market, they have created a new global travel marketplace that is easy to access by millions and millions of consumers. That made it interesting for us as a group to work on this assignment, as there are many articles and studies that have been done on this competitive new market.
1. The intensity of rivalry among existing competitors (High): It's high in this industry because of the Internet. When customers book a hotel online, they usually want the best price with the best services. Hotels.com has many competitors in this industry. For example, Booking.com, Airbnb.com, Agoda.com, Expedia.com, etc. Many of them offer worldwide services, and they also have their own app, which is easy to download and easy to use. However, many hotels have their website, and they have great deals too. The cost switching and fixed cost are low. When customers find hotels on these websites, they usually find the similar deals because these companies offer undifferentiated product, and these companies don’t have too much diversity. Similar players are a lot, so the intensity of rivalry among existing competitors is high.
2. The threat of new entrants (Moderate): it’s moderate in this industry because internet makes barriers very low, and it’s easy to enter this industry, but new entrants need great strength to play in this industry. Due to the low product diversity and low switching cost, customers are easily lost, so some companies have low customer loyalty. For Hotels.com and other similar companies, they have to provide some reward services, such as “Hotels.com Rewards.” In additional, they have to offer the lowest price for keeping their customers. At this point, if a new company doesn’t have sufficient funds to support in the beginning, the company is hard to survive in this industry. To keep gaining, the company needs a huge number of users and more than enough cash flows. However, new entrants usually don’t have too much users in the beginning. Therefore, the threat of new entrants is moderate.
3. Threat of Substitution Products (High): It’s high in this industry because the change of prices that can affect other products’ prices can happen in matter of seconds. According to Porter the substitute products model is a product that can be in other businesses. It depends on the customer needs, which can be influenced by the adjustment of prices of some different products. An example of that is that travelers can find and search for too many offers on many platforms online, and it also provides the customer with price comparisons everywhere.
4. The bargaining power of Buyers (Moderate):
Buyers nowadays just don’t care from whom or where they are going to buy the service or the product. Simply the buyer is going to compare the prices among all other competitors in order to find the best deal for him/her.
Switching cost is low in this case, as brand loyalty is usually considered to be low in service businesses, unlike retail businesses where the consumer is much more loyal to the brand.
But that only gives the consumer a “reasonable” buying power, because there isn’t much of a bargaining power in this situation. It’s true that there are many other alternatives and competitors, but there are also millions of consumers in the market.
5. The bargaining power of Suppliers (High): It’s high in hospitality industry because suppliers as hotels in general control the prices of what they would give it to distributers such as Hotels.com. The same aspects apply in the travel agencies. It can easily be shown how the supplier of goods and services can raise and manipulate the prices. How do we know when is the supplier has the power in a company? If a supplier can affect a company that means that the company has fewer suppliers, these suppliers have power, and are strong enough to influence the company.
SWOT Analysis: (Assignment 3)
SWOT analysis is done to provide a better understanding for the company’s business by studying and analyzing the Strength, Weaknesses, Opportunities, and Threats for the company.
Hotels.com provides a variety of travel and vacation bundle services to consumers. The company’s wide distribution network is its major strength, as although their reliance on the US market is considered as an area of weakness. Moreover, expansion and growth in new areas may be considered as opportunities that may impact the company’s performance in the future. However, fraudulent trade and the market demand are likely a big threat to every successful business in this market.
Hotels.com Strengths:
1. Wide Distribution Network: By focusing only on hotel products and services, that helped Hotel.com to operate more efficiently by having more than 85 localized sites around the world. Moreover, applying this “Long Tail” strategy gives the company a competitive advantage, and provides the consumers with variety of choices.
2. Strong Brand: Hotel.com is a brand that comes originally from Expedia, Inc. Expedia is a leading brand in this market and people trust dealing with them. Hotel.com have benefited from that, and this strong portfolio helps them to deal with millions of customers everyday and enhance their revenues.
Hotels.com Weaknesses:
- High Dependence on The US Market: Hotel.com and their mother company Expedia have acquisitions of over 17% of the total travel market in the US, that’s more than any other business in the world. This huge percentage of acquisition in the US market has forced them to lose acquisition in every other region.
- Operational Decline: The company has reported a significant decline in operations. The company reported a 15% decrease in operating income compared to the previous years.
This poor performance may affect the growth of the business and the stakeholders’ confidence to invest more into the business.
Hotels.com Opportunities:
1. Expansion in Asian Market: Asia and Pacific regions control more the 30% of the travel share globally.
Expedia only acquire 1% market share in those regions. Expanding and growing more in this region will definitely result in huge amount of revenues, as customers worldwide trust their brand.
2. Improving The Reward Program: Hotels.com doesn’t offer the best reward program. The program can be way better and more efficient. Doing a partnership with hotels and airline companies to transfer the reward points is one way to improve it. By promoting such offer, customers will be more loyal to the brand.
Hotels.com Threats:
- First: High Competition: Hotel.com face a high competition in this field from similar type businesses like Booking.com, TripAdvisor, and Trivago.
In 2013, that effected them really hard and resulted in 7% decline in revenues. For that, competition will always remain a big threat.
2. Market Demand: According to a study done by NBC News, people are traveling less than before, especially in the holidays season, where that is the most profitable season for travel businesses.
According to the Global Business Travel Association, there was 1% drop in the number of trips last season. Global Business Travel Association’s CEO said about that: “For airlines, hotels, and car rentals, it’s all supply and demand.”
Strategic Recommendations: